Can we still anticipate a record U.S. soybean crop?

The quarterly stocks report, scheduled for release on June 28, will be important to determine how strong domestic consumption has been and just how tight old-crop ending stocks will finish up the marketing year. The accompanying acreage report will be far more significant, though, because it is a more accurate reflection of how many acres farmers planted.

One other note on the domestic front: Soybean oil received a new lease on life when Congress instituted biodiesel incentives early last year, which included a $1-per-gallon tax credit. The USDA estimates that soybean oil usage for biodiesel will grow during the 2013-14 marketing year to a record 5.4 billion pounds, 10% above 2012-13 usage. That represents 27% of total U.S. soybean oil consumption. To put that in perspective, consider that as recently as 2009-10, only 8.7% of U.S. soybean oil was used as biodiesel.

The outcome of the U.S. growing season is crucial after U.S. supplies for the 2012-13 marketing year have been all but depleted, as illustrated. New-crop prices will certainly gyrate with the inevitable threatening weather forecasts, but there is no real urgency.

Brazil and Argentina have produced record crops of 85 million tonnes and 54.5 million tonnes, respectively. That’s up from 83 million tonnes and 51 million tonnes the previous year. Global ending stocks are estimated at 73.69 million tonnes, or 27.3% of consumption. That is just shy of record burdensome stocks we saw in 2006-07 and 2010-11. Although that figure is highly tentative, because US acreage and yield estimates are probably already too high – not to mention the unknown of the weather in July and August – it is still likely to be a substantial improvement over the past two seasons, when the global carryover averaged only 22.5% of usage.

To some degree, current price levels have factored in the overly optimistic USDA estimate for the US crop. Perfect weather will erase any price gains in a hurry. On the other hand, bears are also at the mercy of the weather. The upcoming USDA quarterly stocks and acreage reports, as well as the July monthly crop report, will incorporate much more up-to-date information about old-crop supplies and prospects for the new crop.